Following on from the previous blog on record keeping, below is yet another example which highlights the importance of record keeping for SMSFs.
Where it can go wrong – another real life example
L and M are members of the L & M Super Fund and are the original trustees. In 1993 a newly incorporated company called LM Holdings Pty Ltd was appointed trustee.
In 1997 the Fund buys a property. A title search for the property shows that ‘LM Holdings Pty Ltd’ is the registered owner.
In 2014 L and M divorce and M becomes the sole member of the Fund. A new trustee, Life after L Pty Ltd is appointed.
The appropriate forms are completed to change the name on the title of the property. An application is submitted to the Office of State Revenue (OSR) for concessional stamping.
OSR requests evidence that LM Holdings Pty Ltd owns the property as trustee of the Fund. The records showing that company’s appointment as trustee in 1993 have been lost. The contract of sale (which showed ‘LM Holdings Pty Ltd as trustee for the L & M Super Fund’ as purchaser) has also been lost.
Eventually other Fund records were produced satisfying OSR that LM Holdings Pty Ltd own the property as trustee for the Fund. However it would have been a much simpler and cheaper exercise if the original appointment of trustee and contract of sale records were available.
L and M were under no obligation to retain the above records as they relate to transactions occurring 20 years ago. However trustees should keep in mind that other authorities such as OSR and the titles office may require copies of documents to be produced from the very beginning of the establishment of the Fund.
Examples such as the above will obviously vary in complexity. Most issues can be solved however they can cost the Fund substantial time and money. Problems are usually not identified until certain events occur such as divorce or the purchase of a property where time can be of the essence.
By Natalie Gosper, a Solicitor in our Commercial Law team.
If you require assistance with your SMSF record keeping, contact the team at Matthews Folbigg Lawyers. Don’t delay!